Major Insurance Company Now Files Unexpected Chapter 15 Bankruptcy

Chapter 15 bankruptcy
Summary
  • Northeast Insurance filed Chapter 15 after Bermuda liquidation as decades-old child sexual abuse claims under New York’s Child Victims Act wiped out its reserves.
  • Its collapse threatens major New York healthcare policyholders, though guaranty associations may partially cover losses while courts sort cross-border proceedings.

In a tough blow to the healthcare sector in New York, Northeast Insurance Company, a Bermuda-based captive insurer that backed several major hospitals and a Jewish nonprofit, has thrown in the towel and filed for Chapter 15 bankruptcy protection in the U.S.

This comes right after it kicked off insolvency and liquidation proceedings back home in Bermuda.

The root of the trouble? A bunch of long-buried child sexual abuse claims that resurfaced thanks to New York’s Child Victims Act, catching the company off guard and wiping out its reserves.

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The filing happened on October 13 in the U.S. Bankruptcy Court for the Southern District of New York, just days after the Bermuda Supreme Court got the ball rolling on liquidation on October 7.

Northeast, which hasn’t written any new policies since the end of 2017, thought it had enough in the bank to cover its existing obligations at the time.

But then came the Child Victims Act in 2019, which shook things up by letting survivors file civil suits up to age 55 and pursue criminal cases up to age 23—instead of cutting off at 18 like before.

Suddenly, the insurer was staring down 55 claims tied to decades-old allegations, and its balance sheet went underwater fast.

As of June 2025, they were dealing with 30 lawsuits, which jumped to 53 by August, nearly doubling their loss reserves from $15.7 million to $29.1 million—an amount they flat-out can’t pay.

Mark Allitt, who’s acting as the foreign representative and joint provisional liquidator, put it plainly in his court declaration: “The claims were unforeseeable at the time of cessation of writing new policies and, therefore, no corresponding reserves were funded at that time.”

He added that when they stopped issuing new coverage in 2017, the reserves looked solid for what they knew then. But hindsight’s 20/20, and these revived claims changed everything.

The Company Worked with Massive Names

Northeast wasn’t some fly-by-night operation; it served as a risk-sharing setup for big names in New York healthcare, like Mount Sinai Medical Center, Maimonides Medical Center, Montefiore Medical Center, Beth Israel Medical Center, CenterLight Health System Inc., and the UJA/Federation of Jewish Philanthropies of New York.

Now, with the bankruptcy in play, there’s an automatic stay on all U.S. legal actions against them, buying some breathing room while the case sorts itself out.

Policyholders aren’t totally hung out to dry, though—state guaranty associations step in as a safety net in these situations, covering claims up to certain limits through groups like the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA).

This kind of collapse is pretty rare in the insurance world.

NOLHGA’s records show just 12 liquidations between 2015 and 2024, with peaks like three in 2019 and none at all in 2018 or 2020.

Some notable ones include CoOpportunity Health in 2015, SeeChange Health Insurance Company that same year, American Medical and Life Insurance Company in 2016, Penn Treaty Network America Insurance Company and American Network Insurance Company in 2017, then a cluster in 2019 with Senior American Insurance Company, Pavonia Life Insurance Company of Michigan, and Northwestern National Insurance Company of Milwaukee, Wisconsin.

More recently, Bankers Life Insurance Company in 2021, North Carolina Mutual Life Insurance Company in 2022, Southland National Insurance Corporation in 2023, and Colorado Bankers Life Insurance Company in 2024.

These weren’t all tied to abuse claims—many stemmed from other issues like mismanaged reserves or market shifts—but they highlight how even established players can crumble.

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A Scandal That Traces Years of Secrets

What’s making Northeast’s case stand out is the direct hit from the Child Victims Act. Laws like this, which reopen the door for old claims, have been rattling the industry for years.

Back in 2020, experts were already warning that insurers would need to beef up reserves because of the extended statutes of limitations.

For instance, A.M. Best put out a report saying companies writing liability policies for schools, churches, or municipalities could face a big financial squeeze.

Big players like Travelers Companies Inc. and Chubb responded by setting aside extra funds—Travelers called it a “modest” amount during a 2020 earnings call, with CFO Daniel Frey noting the uncertainties around sex-abuse liabilities spurred by new state laws.

It’s not just New York feeling the heat.

Similar revival statutes in places like New Jersey, California, Montana, and Vermont have led to thousands of lawsuits. In New York alone, nearly 11,000 cases were filed during the initial window.

Organizations like the Roman Catholic Archdiocese of New York have sued over 30 insurers to force coverage for these claims, showing how the pressure’s building on both sides.

A Trend That’s Overlooked?

And it’s not limited to the U.S.—in Australia, a flood of claims post-royal commission into child sexual abuse caused an insurance market collapse for foster care providers, leaving some without coverage for abuse liabilities since mid-2021.

Critics, including survivors and lawmakers, argue that insurers are dragging their feet.

In September 2025, a group of Child Victims Act filers called out New York state for not enforcing laws to make companies respond faster, as thousands of cases sit stalled in court.

Rep. Mike Lawler went further, accusing Gov. Kathy Hochul of dropping the ball on pushing insurers to pay up.

On the flip side, a February 2025 ruling from a New York appellate court clarified some insurer obligations under the Act, offering a bit more guidance on coverage for sexual misconduct allegations.

Broader trends show insurers bracing for more.

Entities like the Boy Scouts, Catholic dioceses, and daycare centers are seeing massive exposure, with some turning to bankruptcy themselves to handle the claims—like the Archdiocese seeking insurer help in its own proceedings.

It’s a messy landscape, and cases like Northeast’s could signal more trouble ahead if states keep expanding these windows.

For now, the focus is on how this plays out in court.

The Chapter 15 filing aims to recognize the Bermuda liquidation as the main proceeding and shield U.S. assets from creditors.

But with healthcare providers relying on this coverage, the ripple effects could hit patients and institutions hard if guaranty funds don’t fully bridge the gap.

Insurance failures might be uncommon, but when they happen, they remind everyone how fragile the system can be against unexpected legal shifts.

Also Read: A Beloved Furniture Store Announces an Unexpected Chapter 7 Bankruptcy

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Founder/CEO, FrankNez Media, United States.
Frank's journalism has been cited by SEC and Congressional reports, earning him a spot in the Wall Street documentary "Financial Terrorism in America".
He has contributed to publications such as TheStreet and CoinMarketCap. A verified MuckRack journalist.

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